AP Macroeconomics: Unit - 6 - Open Economy- International Trade and Finance Practice Test

1. Question

Which of the following is likely to occur following the depreciation of the United States dollar?

United States imports will increase.
United States exports will increase.
Demand for the United States dollar will decrease.
United States demand for foreign currencies will increase.
United States goods will become more expensive in foreign markets.

2. Question

If Country Alpha has been experiencing a higher inflation rate than Country Beta over the past decade, which of the following is true?

Alpha’s currency will have appreciated relative to Beta’s currency.
Alpha’s currency will have depreciated relative to Beta’s currency.
Alpha will have had lower nominal interest rates than Beta.
Alpha will have had slower growth in the money supply than Beta.
Alpha’s economy will have grown at a faster rate than Beta’s.

3. Question

Assume that there is an increase in United States consumers’ preference for European cars. Which of the following changes will most likely take place in the market for dollars?

It will take more Euros to purchase the same amount of dollars.
The demand for dollars will increase.
The supply of dollars will increase
Both the demand for and the supply of dollars will decrease.
There will be no change in the foreign exchange market.

4. Question

Which of the following best describes the balance of payments accounts?

A record of the financial capital inflows and outflows in a country
A record of a bank’s assets and liabilities
A record of all of a country’s exports and imports
A record of all international transactions
A record of foreign remittances to a country

5. Question

Which of the following describes something that would definitely be recorded as an increase in the current account?

An increase in net exports
Selling bonds domestically
Selling bonds to foreign citizens
An increase in real GDP
A decrease in factor income earned abroad

6. Question

The currency of Ghana is the cedi and the currency of Aruba is the florin. Which of the following best defines the exchange rate for the Aruban florin?

The number of cedi needed to exchange for goods
The quantity of florin per cedi
The quantity of cedi per florin
The quantity of cedi needed
The quantity of florin needed to exchange for goods

7. Question

Which of the following best describes an appreciated currency?

It takes less of another currency to buy that currency
The depreciated currency can buy fewer domestic goods and services
It takes more of another currency to buy that currency
The depreciated currency can buy more domestic goods and services
The depreciated currency can buy more domestic goods and services

8. Question

Which of the following best explains why many United States economists support free international trade?

Workers who lose their jobs can collect unemployment compensation.
It is more important to reduce world inflation than to reduce US unemployment.
Workers are not affected; only businesses suffer.
The long-run gains to consumers and some producers exceed the losses to other producers.
Government can protect United States industries while encouraging free trade.

9. Question

If a country has a current account deficit, which of the following must be true?

It must also show a deficit in its capital account.
It must show a surplus in its capital account.
It must increase the purchases of foreign goods and services.
It must increase the domestic interest rates on its bonds.
It must limit the flow of foreign capital investment

10. Question

Which of the following would cause the United States dollar to increase in value compared to the Japanese yen?

An increase in the money supply in the United States
An increase in interest rates in the United States
An increase in the United States trade deficit with Japan
The United States purchase of gold on the open market
The sale of $2 billion dollars’ worth of Japanese television sets to the United States

11. Question

As nations specialize in production and trade in international markets, they can expect which of the following domestic improvements?
I.Allocation of domestic resources
II.Standard of living
III.Self-sufficiency

I only
II only
III only
I and II only
I, II, and III

12. Question

The currency of Hamiltonia is the shot, and the currency of the United States is the dollar. If citizens of Hamiltonia want to take advantage of relatively higher interest rates in the United States, which of the following will happen?

The demand for the shot in the foreign exchange market for the shot will increase.
The supply of the shot in the foreign exchange market for the shot will increase.
The money supply in Hamiltonia will decrease.
The money supply in Hamiltonia will increase.
The demand for the dollar in the foreign exchange market for the dollar will decrease.

13. Question

Which of the following would increase the demand in the foreign exchange market for the U.S. dollar?

U.S. residents want to buy more goods exported from Japan
Japanese residents want to buy more goods exported from the U.S.
Japanese residents start to view U.S. assets as riskier
Americans want to buy more cars from Japan
Japanese businesses decide to use the accounting services from the United Kingdom instead of the U.S.

14. Question

What effect does this have in Marthaland on real interest rates and the value of Marthaland’s currency in the short run and economic growth in the long run?

Real interest rates increase, Marthaland’s currency depreciates, and economic growth increases.
Real interest rates decrease, Marthaland’s currency appreciates, and economic growth decreases.
Real interest rates decrease, Marthaland’s currency isn’t affected, and economic growth isn’t affected.
Real interest rates decrease, Marthaland’s currency depreciates, and economic growth increases.
Real interest rates increase, Marthaland’s currency depreciates, and economic growth isn’t affected.

15. Question

Assuming there is no change in the nominal exchange rate, what will be the effect of contractionary monetary policy in Canada on the Canadian price level and the real exchange rate (RER) of the Canadian dollar?

Price level will increase; RER will increase.
Price level will increase; RER will decrease.
Price level will decrease; RER will increase.
Price level will decrease; RER will remain unchanged.
Price level will decrease; RER will decrease.

16. Question

What happens to the currency of Maxistan and aggregate demand in Maxistan if the demand for its financial assets decreases?

Currency depreciates; aggregate demand decreases
Currency appreciates; aggregate demand (AD) increases
Currency depreciates; no impact on Maxistan’s Aggregate demand (AD)
Currency appreciates; no impact on Maxistan’s Aggregate demand (AD)
Currency depreciates; aggregate demand (AD) increases

17. Question

Maxistan and Ile are trading partners. Maxistan is currently experiencing a recession and, as a result, investors in Ile have less demand for Maxistan’s financial assets. What will happen to the value of Ile’s currency and the value of Ile’s exports as a result of the decreased demand for foreign financial assets?

Ile’s currency appreciates; no impact on exports from Ile
Ile’s currency depreciates; Ile’s exports decrease
Ile’s currency appreciates; exports from Ile decrease
Ile’s currency depreciates; Ile’s exports increase
There is no impact on Ile’s currency or exports

18. Question

As a result of deficit spending, the government of Japan borrowed money in the market for loanable funds. What happens to the exchange rate for the yen and Japanese exports as the result of the change in the market for loanable funds?

Yen doesn’t change; Japanese exports don’t change
Yen depreciates; exports decrease
Yen appreciates; exports decrease
Yen appreciates; Japanese exports are unaffected
Yen depreciates; exports increase

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AP Macroeconomics: Unit – 6 – Open Economy- International Trade and Finance Practice Test

AP Macroeconomics: Unit – 6 – Open Economy- International Trade and Finance Practice Test

AP Macroeconomics: Unit – 6 – Open Economy- International Trade and Finance Practice Test

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1. Question

Which of the following is likely to occur following the depreciation of the United States dollar?

2. Question

If Country Alpha has been experiencing a higher inflation rate than Country Beta over the past decade, which of the following is true?

3. Question

Assume that there is an increase in United States consumers’ preference for European cars. Which of the following changes will most likely take place in the market for dollars?

4. Question

Which of the following best describes the balance of payments accounts?

5. Question

Which of the following describes something that would definitely be recorded as an increase in the current account?

6. Question

The currency of Ghana is the cedi and the currency of Aruba is the florin. Which of the following best defines the exchange rate for the Aruban florin?

7. Question

Which of the following best describes an appreciated currency?

8. Question

Which of the following best explains why many United States economists support free international trade?

9. Question

If a country has a current account deficit, which of the following must be true?

10. Question

Which of the following would cause the United States dollar to increase in value compared to the Japanese yen?

11. Question

As nations specialize in production and trade in international markets, they can expect which of the following domestic improvements? I.Allocation of domestic resources II.Standard of living III.Self-sufficiency

12. Question

The currency of Hamiltonia is the shot, and the currency of the United States is the dollar. If citizens of Hamiltonia want to take advantage of relatively higher interest rates in the United States, which of the following will happen?

13. Question

Which of the following would increase the demand in the foreign exchange market for the U.S. dollar?

14. Question

What effect does this have in Marthaland on real interest rates and the value of Marthaland’s currency in the short run and economic growth in the long run?

15. Question

Assuming there is no change in the nominal exchange rate, what will be the effect of contractionary monetary policy in Canada on the Canadian price level and the real exchange rate (RER) of the Canadian dollar?

16. Question

What happens to the currency of Maxistan and aggregate demand in Maxistan if the demand for its financial assets decreases?

17. Question

18. Question

As a result of deficit spending, the government of Japan borrowed money in the market for loanable funds. What happens to the exchange rate for the yen and Japanese exports as the result of the change in the market for loanable funds?

As nations specialize in production and trade in international markets, they can expect which of the following domestic improvements?
I.Allocation of domestic resources
II.Standard of living
III.Self-sufficiency